E-book or Not to E-book

I got this from a professor in my program - Zsuzsi Gartner. It's sort of a survey writers.

1.) Let's say you have a finished manuscript (any genre) and a publisher makes you the following offer for an advance against royalties:
-$15,000 for hardcover (or top quality tradepaper with french flaps) original and e-book.
OR
-$20,000 is only published as e-book.

Industry standard royalty rates apply after the advance has been paid off.

Which would you accept?

My response...

Let's do a rundown on the economics of publishing.

COSTS OF BOOKS

Physical Books

Take an average Trade Paperback and set the price at $20. The cost of printing accounts for 10% of the price ($2) leaving the remainder for the Distributor (10%... $2), the Retailer (40% - $8), the Publisher (45% - $9) and YOU (15% - $3).*

e-Books

The average e-Book costs $10 a copy. There is no print cost or distribution cost. The costs are Retailer (30% - $3), Publisher (55% - $5.50) and YOU (15% - $1.50)**

The goal line I'll establish is a modest yearly salary - $30,000.***

For TP and eBook simultaneous release ($20 per copy - most publishers match these prices for the initial sales period)

TP/eB - 10,000 copies
HC - 5,000 copies

For e-Book only

eB - 20,000 copies

What to do? The easy, quick money is to do the e-Book. You need sales of 3300 copies (HC) or 6600 (TP) to earn the $20,000 the e-Book deal gets you. But will that many copies of your books fly off the shelves? Sales of 3300 hardcovers is a lot more than most Canadian authors usually achieve.

However, if you knock it out of the park, and your book starts going an extra print run or two, and you hit 10,000 copies sold, your earnings will hit $60,000. To do the same with an e-Book, sales would have to hit 40,000 copies.

10,000 is a lot easier to hit than 40,000.****

What would you do? Before you decide, here is a little background info...

In Canada, sales of 5,000 copies makes a book a "bestseller", but it can takes months or even years to reach that amount.

Also, the key issue for e-books is the date at which an author regains control of their back list. Control of titles allows for control of price point, which is where authors can really start to reap financial rewards. But publishers are very reluctant to give this to authors.

*Industry standard is between 8% - 15%, so you could be getting as little as $1.60 per book. Even less if the publisher has to slash prices at the request of the distributor or the merchant.

**If your publisher is a jerk, and gave you 8%, if you foolishly accepted the offer instead spitting in his face and self-publishing with a full 70% royalty, you'd get $0.80 a copy.

***15% of your earning go to your agent (Can't forget them!), so you would need to increase your sales figures by that amount to hit $30,000.

****This is the true crux of the issue. Do you take the lower advance in order to have a hardcover or two, and legit author creds before going it alone, or do you just go it alone form the get go. Earning $30,000 only requires sales of 4,285 copies at $10 each if you are getting the full 70% royalty. When you add in the agent fees to hardcover sales, to get $60,000, you would only need to sell 8,570 copies of e-Books, compared to the 11,764 hardcovers you would need to sell. It is a LOT easier to sell a $10 book than a $40 book.